08 Department of the Treasury Internal Revenue Service

2008 Department of the Treasury
Internal Revenue Service

Instructions for Form 8854

Expatriation Information Statement

Section references are to the Internal Revenue Code unless notice to the Secretary of such treatment on Forms 8833
otherwise noted. and 8854. See Regulations section 301.7701(b)-7 for
information on other filing requirements if you are such an
General Instructions individual.

Purpose of Form Long-term resident (LTR) defined. You are an LTR if
you were an LPR of the United States in at least 8 of the last
Expatriation tax provisions apply to U.S. citizens who have 15 tax years ending with the year your status as an LTR
relinquished their citizenship and long-term residents who ends. In determining if you meet the 8-year requirement, do
have ended their residency (expatriated). Form 8854 is used not count any year that you were treated as a resident of a
by individuals who have expatriated on or after June 4, foreign country under a tax treaty and did not waive treaty
2004, to provide information required by section 6039G. benefits applicable to residents of the country.

The date on which you are considered to have Lawful permanent resident. You are an LPR of the
expatriated determines whether you must file Part A or Part United States if you have been given the privilege,
B. You are considered to have expatriated on the date you according to U.S. immigration laws, of residing permanently
relinquished your citizenship (in the case of a former citizen) in the United States as an immigrant. You generally have
or terminated your long-term residency status (in the case of this status if you have been issued an alien registration card,
a former U.S. resident). If you expatriated after June 3, also known as a “green card.”
2004, and before June 17, 2008, complete General
Information and Part A. If you expatriated after June 16, Expatriation After June 3, 2004,
2008, complete General Information and Part B. and Before June 17, 2008

Expatriation. Expatriation includes the acts of relinquishing The rules in this section apply to persons who are
U.S. citizenship and terminating long-term residency. considered to have expatriated after June 3, 2004, and
before June 17, 2008.
Date of relinquishment of U.S. citizenship. You are
considered to have relinquished your U.S. citizenship on the Date of Tax Expatriation
earliest of the following dates.
For purposes of filling out Part A, the date of your
1. The date you renounced your U.S. citizenship before expatriation will be the later of the date you notify the
a diplomatic or consular officer of the United States relevant agency of your expatriating act or the date this form
(provided that the voluntary renouncement was later is filed in accordance with these instructions. Apply the rules
confirmed by the issuance of a certificate of loss of of section 7502 to determine the date on which this form is
nationality). filed. Generally, the postmark date is the filing date.

2. The date you furnished to the State Department a Until you file Form 8854 and notify the Department of
signed statement of your voluntary relinquishment of U.S.
nationality confirming the performance of an expatriating act ! State or the Department of Homeland Security of
(provided that the voluntary relinquishment was later
confirmed by the issuance of a certificate of loss of CAUTION your expatriating act, your expatriation for
nationality). immigration purposes will not relieve you of your obligation
to file U.S. tax returns and report your worldwide income as
3. The date the State Department issued a certificate of a citizen or resident of the United States.
loss of nationality.
Who Must File
4. The date a U.S. court canceled your certificate of
naturalization. You must file Form 8854 to:

Date of termination of long-term residency. If you • Establish that you have expatriated for tax purposes; or
were a U.S. long-term resident (LTR), you terminated your • Comply with the annual information reporting
lawful permanent residency on the earliest of the following
dates. requirements of section 6039G, if you are subject to tax
under section 877.
1. The date you voluntarily abandoned your lawful Note. If you were a naturalized citizen, but lost your
permanent resident (LPR) status by filing Department of citizenship because a federal court revoked your
Homeland Security Form I-407 with a U.S. consular or naturalization under section 340 of the Immigration and
immigration officer, and the Department of Homeland Nationality Act, you do not need to complete this form if,
Security determined that you had, in fact, abandoned your after the revocation, you hold the status under the
LPR status. Immigration and Nationality Act of an alien lawfully admitted
for permanent residence. You must complete this form,
2. The date you became subject to a final administrative however, if you were a naturalized citizen and you gave up
order for your removal from the United States under the your citizenship by expatriation under section 349 of the
Immigration and Nationality Act and you actually left the Immigration and Nationality Act.
United States as a result of that order.
Taxation Under Section 877
3. If you were a dual resident of the United States and a
country with which the United States has an income tax You are subject to taxation under section 877 if you are a
treaty, the date you commenced to be treated as a resident former U.S. citizen or former LTR and any one of the
of that country and you determined that, for purposes of the following applies to you.
treaty, you are a resident of the treaty country and gave

Cat. No. 24874E

1. Your average annual net income tax liability for the 5 date for filing this form. However, until you both file this form
tax years ending before the date of your expatriation is more with the Internal Revenue Service and notify either the
than the amount listed next. Department of State or the Department of Homeland
Security of your expatriation, you will continue to be treated,
a. $124,000 if you expatriated in 2004. for tax purposes, as if you were still a U.S. citizen or
b. $127,000 if you expatriated in 2005. resident. The date of your tax expatriation (the date you are
c. $131,000 if you expatriated in 2006. no longer subject to U.S. taxation on a worldwide basis) is
d. $136,000 if you expatriated in 2007. the date on which you have satisfied both requirements.
e. $139,000 if you expatriated in 2008.
This amount is subject to cost-of-living adjustments. The Annual Information Statement. If you are a nonresident
IRS will announce the amounts applicable to future years in alien filing this form to comply with the annual information
annual revenue procedures that will be published in the reporting requirements of section 6039G, this form should
Internal Revenue Bulletin. The Internal Revenue Bulletins be attached to a timely filed Form 1040NR, U.S.
can be accessed at www.irs.gov/irb. Nonresident Alien Income Tax Return, and a copy should be
2. Your net worth is $2 million or more on the date of sent to the address under Where To File below. If you are
your expatriation. not required to file Form 1040NR, submit this form to the
3. You fail to certify on Form 8854 that you have address under Where To File below by the due date for filing
complied with all of your federal tax obligations for the 5 tax Form 1040NR.
years preceding the date of your expatriation.
Where To File
If you are subject to tax under section 877, you are no
longer taxed as a citizen or resident on your worldwide If you are present in the United States following your
income. However, you must compute your tax as a expatriation and are subject to tax as a U.S. citizen or
nonresident in accordance with the special rules of section resident, file Form 8854 with your Form 1040 and send a
877. These rules expand the categories of income and gain copy to the address below.
on which you owe tax. You are also subject to special rules
for gift and estate tax purposes that differ from those Internal Revenue Service
applicable to other nonresident aliens. P.O. Box 331
Drop Point S607-F8854
Exceptions to section 877. Provided you have certified Bensalem, PA 19020
that you have met your tax obligations for the 5 tax years
prior to your expatriation, you will not be subject to tax under Expatriation After June 16, 2008
section 877(b) if either of the following exceptions applies.
The rules in this section apply to persons who are
• You became at birth a U.S. citizen and a citizen of considered to have expatriated after June 16, 2008.

another country, you continue to be a citizen of the other Who Must File
country, and you have no substantial contacts with the
United States. If you expatriated after June 16, 2008, the expatriation rules
apply to you if any of the following statements apply.
• You became at birth a U.S. citizen, neither of your parents
1. Your average annual net income tax for the 5 tax
was a U.S. citizen at the time of your birth, your loss of years ending before the date of expatriation is more than
citizenship occurred before you attained age 181/2, and you $139,000.
were not present in the United States for more than 30 days
during any of the 10 calendar years preceding your loss of 2. Your net worth was $2 million or more on the date of
citizenship. your expatriation.

See the instructions for lines 4 and 5 on page 4. 3. You fail to certify on Form 8854 that you have
complied with all federal tax obligations for the 5 tax years
Tax consequences of presence in the United States preceding the date of your expatriation.
after expatriation. If, for any tax year during the 10-year
period in which you are otherwise subject to section 877, Covered expatriate. You are a covered expatriate if you
you are present in the United States for more than 30 days meet (1), (2), or (3) above.
in a calendar year ending in such tax year, you will be
treated as a U.S. citizen or resident for that tax year. You Exception for dual-citizens and certain minors.
will be subject to U.S. tax on your worldwide income unless Dual-citizens and certain minors (defined next) are not
the following exception applies. subject to the expatriation tax even if they meet (1) or (2)
above. However, they still must provide the certification
Exception. You can be present in the United States for required in (3) above.
up to 60 days without being treated as a U.S. citizen or
resident if you are performing personal services in the Certain dual-citizens. You may qualify for the
United States for an employer who is not related (within the exception described above if you meet the following
meaning of sections 267 and 707) to you and you meet requirements.
either of the following requirements.
• You became at birth a U.S. citizen and a citizen of
• You were a U.S. citizen and, within a reasonable period
another country and you continue to be a citizen of, and are
following your expatriation, you became a citizen or resident taxed as a resident of, that other country.
fully liable to tax in the country in which you, your spouse, or
either of your parents was born; or • You were a resident of the United States for not more

• For each year in the 10-year period ending on the date of than 10 years during the 15-tax-year period ending with the
tax year during which the expatriation occurred. For the
expatriation, you were physically present in the United purpose of determining U.S. residency, use the substantial
States for 30 days or less. presence test described in chapter 1 of Publication 519.

See Pub. 519, U.S. Tax Guide for Aliens, for details Certain minors. You may qualify for the exception
about what constitutes a day of presence in the United described above if you meet all of the following
States. requirements.

When To File • You expatriated before you were 181/2.
• You were a resident of the United States for not more
Initial Information Statement. If you are filing this form
because you expatriated during the tax year, there is no due than 10 tax years before the expatriation occurs. For the
purpose of determining U.S. residency, use the substantial
presence test described in chapter 1 of Publication 519.

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Taxation Under Section 877A Specific Instructions

In the year you expatriate, you are subject to income tax on General Information
the net unrealized gain in your property as if the property
had been sold for its fair market value on the day before This section is to be completed by all filers.
your expatriation date (“mark-to-market tax”). This applies to
most types of property interests you held on the date of your Line A
expatriation. But see Exceptions below.
Generally, this number is your U.S. social security number.
Gains from deemed sales are taken into account without An incorrect or missing identifying number may result in a
regard to other U.S. internal revenue laws. Losses from continued obligation to file U.S. tax returns as a citizen or
deemed sales are taken into account to the extent otherwise resident of the United States for persons expatriating after
provided under U.S. internal revenue laws. However, June 3, 2004, and before June 17, 2008, and/or a penalty of
section 1091 (relating to the disallowance of losses on wash $10,000. If you were never issued a social security number,
sales of stock and securities) does not apply. The net gain please attach a statement explaining the reason.
that you otherwise must include in your income is reduced
(but not below zero) by $600,000. Line B

Exceptions. The mark-to-market tax does not apply to the If you have a P.O. box, enter your box number instead of
following. your street address only if your post office does not deliver
mail to the street address.
1. Eligible deferred compensation items.
2. Ineligible deferred compensation items. Line C
3. Specified tax deferred accounts.
4. Interests in nongrantor trusts. Enter the information in the following order: street address,
city, province or state, and country. Follow the country’s
Instead, items (1) and (4) are subject to withholding at practice for entering the postal code. Do not abbreviate the
source. In the case of item (2), you are treated as receiving country name.
the present value of your accrued benefit as of the day
before the expatriation date. In the case of item (3), you are Line D
treated as receiving a distribution of your entire interest in
the account on the day before your expatriation date. See Enter the country of which you are considered a resident for
paragraphs (d), (e), and (f) of section 877A for more tax purposes if it is different from the country in which your
information. principal foreign residence is located.

Deferral of payment of mark-to-market tax. You can Line E
make an irrevocable election to defer payment of the
mark-to-market tax imposed on the deemed sale of Your expatriation date is the date you relinquish citizenship
property. If you make this election, the following rules apply. (in the case of a former citizen) or terminate your long-term
residency (in the case of a former U.S. resident). See Date
1. You make the election on a property-by-property of relinquishment of U.S. citizenship or Date of termination
basis. of long-term residency on page 1.

2. The deferred tax on a particular property is due on the Line F
return for the tax year in which you dispose of the property.
If you are a person who expatriated between June 3, 2004,
3. Interest is charged for the period the tax is deferred. and June 17, 2008, and you have not yet notified the
4. The due date for the payment of the deferred tax Secretary of State or Secretary of Homeland Security in
cannot be extended beyond the earlier of the following connection with your expatriating act, you must file an
dates. amended Form 8854 stating the date on which such
notification occurs.
a. The due date of the return required for the year of
death. Citizen. Check this box if you are a former U.S. citizen, and
enter the date on which you gave notice of your expatriation
b. The time that the security provided for the property to the Department of State.
fails to be adequate. See item (6) below.
Long-term resident. Check this box if you are a former
5. You make the election in Part B, Section III. LTR, and enter the date on which you gave notice of
6. You must provide adequate security (such as a bond) termination of your LPR status to the Department of
under rules to be issued by the IRS. Homeland Security.
7. You must make an irrevocable waiver of any right
under any treaty of the United States that would preclude Long-term resident with dual residency. Check this box
assessment or collection of any tax imposed by section if you are an LTR with dual residency in a treaty country,
877A. and enter the date you commenced to be treated for tax
purposes as a resident of the treaty country (see Date of
When To File termination of long-term residency on page 1).

If you expatriated after June 16, 2008, and before January Part A—For Persons Who
1, 2009, this form should be filed by the due date of your
income tax return (including extensions). For most Expatriated Before June 17, 2008
individuals, the due date before extensions will be June 15,
2009. Check the Initial Information Statement box if you are filing
this form as your initial expatriation information statement to
Where To File establish that you have expatriated for tax purposes. Check
the Annual Information Statement box if you are a
If you expatriated after June 16, 2008, attach Form 8854 to nonresident alien filing this form to comply with the annual
your Form 1040 or Form 1040NR and send a copy of Form information reporting requirement of section 6039G.
8854 to the address below. If you are not otherwise required
to file a U.S. tax return, send Form 8854 to: Section I—Initial Information Statement

Internal Revenue Service All individuals whose expatriation date is after December 31,
P.O. Box 331 2007, and before June 17, 2008, must complete this section
Drop Point S607-F8854
Bensalem, PA 19020
.

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and Schedules A (Balance Sheet) and B (Income Line 7a
Statement).
List all foreign countries of which you are a citizen.
Line 2
Line 7b
Use the balance sheet in Schedule A to arrive at your net
worth. Indicate how you became a U.S. citizen. For example, if you
acquired citizenship at birth, write “At Birth.” If you acquired
Line 4 citizenship through naturalization, write “Naturalized
Citizen.”
You have no substantial contacts with the United States if
you (a) were never a resident of the United States (as Line 7c
defined in section 7701(b)), (b) never held a U.S. passport,
and (c) were not present in the United States for more than Provide the date on which you became a citizen of each
30 days per calendar year during any of the 10 calendar country listed on line 7a.
years preceding your loss of U.S. citizenship.
Line 8
Line 5
If you were physically present in the United States for more
Check the “Yes” box if: than 60 days during the tax year, you will be taxed as a U.S.
citizen or resident and must file Form 1040 for the current
• You are a minor who became a U.S. citizen at birth, tax year. If in a subsequent year within the 10-year period
• Neither of your parents was a U.S. citizen at the time of you are not physically present more than 30 days during the
year, you will again be subject to section 877 and file Form
your birth, 1040NR. If you were present more than 60 days during the
year, skip line 9.
• Your loss of citizenship occurred before you attained age
Line 9
181/2, and
If you were physically present in the United States more
• You were not present in the United States for more than than 30 days but not more than 60 days during the tax year,
complete lines 9a and b. If you answer “No” to either
30 days per calendar year in any of the 10 calendar years question, you will be taxed as a U.S. citizen or resident and
preceding your loss of U.S. citizenship. must file Form 1040 for the current tax year. If you answer
“Yes” to both questions, you remain subject to section 877
Line 6 for the tax year.

Check the “Yes” box if you have complied with your tax Schedule A—Balance Sheet
obligations for the 5 tax years ending before the date on
which you expatriated, including but not limited to, your Note. If there have been significant changes in your assets
obligations to file income tax, employment tax, gift tax, and and liabilities for the period that began 5 years prior to your
information returns, if applicable, and your obligation to pay expatriation and ended on the date that you file Form 8854,
all relevant tax liabilities, interest, and penalties. You will be you must attach a statement explaining the changes. Also,
subject to tax under section 877 if you have not complied attach a similar statement if you expect significant changes
with these obligations, regardless of whether your average in the 10-year period after expatriation or termination of
annual income tax liability or net worth exceeds the residency.
applicable threshold amounts.
Columns (a) and (b)
Section II—Annual Information
Statement Under Section 6039G List the fair market value (in U.S. dollars) of each class of
assets and your U.S. adjusted basis (in U.S. dollars) in the
If section 877 applies to you, you must complete Section II class of assets. You can use good faith estimates of fair
and Schedules A (Balance Sheet) and B (Income market value and basis. Formal appraisals are not required.
Statement) for the 10 tax years beginning with the year that
includes the date of your expatriation, whether or not you Column (c)
owe tax under section 877 for the tax year. This means that
if you perform an expatriating act before June 17, 2008, you Subtract the amounts in column (b) from the amounts in
must complete both Sections I and II of Part A. column (a) and show the gain or (loss) in column (c). Enter
negative amounts in parentheses.
Exception to filing Section II. Section 877 does not apply
to you if your net worth is less than $2 million as of the date Column (d)
of your tax expatriation, your average annual net income tax
liability for the 5 tax years prior to the date of your tax If you are a former U.S. LTR, it may benefit you to complete
expatriation was not more than the amount listed under column (d). For more details, see section 877(e)(3)(B). Only
Taxation Under Section 877 beginning on page 1, and you former U.S. LTRs should complete column (d).
certify that you have met your tax obligations for the 5 tax
years prior to expatriation. Enter in column (d) the fair market value of each asset on
the date you first became a U.S. resident for tax purposes.
If you exceed these dollar thresholds and you certify that
you have met your tax obligations, section 877 may still not Note. The date you first became a U.S. resident for tax
apply to you if you meet one of the exceptions for purposes is not always the same as the date you first
dual-citizens at birth with no substantial presence or for became a U.S. LPR. For details on U.S. residency (including
certain minors. See Exceptions to section 877 on page 2. the substantial presence test), see Pub. 519.

You do not need to complete Section II if: Line 5a

• Your average annual net income tax liability for the 5 tax List the appropriate amount in each column for all
nonmarketable stock and securities issued by foreign
years ending before the date of expatriation (see line 1 of corporations that would be controlled foreign corporations if
Section I) was not more than the amount listed under you were still a U.S. citizen or resident. Note that these
Taxation Under Section 877 on page 2, your net worth on amounts are already included on line 5. Do not include
line 2 of Section I was less than $2 million, and you checked amounts on this line in the total on line 20.
the “Yes” box on line 6 of Section I;

• You checked the “Yes” box on line 3, the “No” box on line

4, and the “Yes” box on line 6; or

• You checked the “Yes” box on lines 5 and 6 of Section I.

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Line 8 section 877 for the tax year, you are liable for tax on that
income as provided in section 1 or section 55, if the tax
List the total value of all your partnership interests. If you computed under such sections exceeds the tax that would
hold an interest in one or more partnerships, you must be imposed on you under section 871. This generally means
attach a statement to Form 8854 that lists each partnership that you must report all income subject to tax under section
separately. Include the employer identification number 877 on Form 1040NR, whether or not it is effectively
(EIN), if any, for each partnership. Describe the assets and connected with the conduct of a trade or business in the
liabilities (using the categories on the balance sheet on page United States, and you are not permitted to exclude certain
2 of Form 8854) from your interest in each partnership. types of income, such as portfolio interest or capital gains,
which normally would be exempt from tax in the hands of a
Line 9 nonresident alien.

List the total value of all assets held by trusts that you are Treaty residents. Most U.S. tax treaties do not prevent the
considered to own for tax purposes. You must attach a United States from continuing to tax former citizens and
statement to Form 8854 that lists each trust separately. former LTRs under domestic law. Unless the treaty prevents
Include the EIN (if any) for each trust. Describe the assets it, you will be subject to the rules of section 877.
and liabilities (using the categories on the balance sheet on
page 2 of Form 8854) from your interest in each trust. Specific Line Instructions

Note. To determine if you are an owner of a trust, see Lines 3 through 6 require reporting income that, but for the
sections 671 through 679. application of section 877(d), would be income from sources
outside the United States. If you report income on these
Line 10 lines, you also must report this income as taxable income on
Form 1040NR.
List the total value of all assets held by nongrantor trusts in
which you are considered to have a beneficial interest. You Line 5
must attach a statement to Form 8854 that lists each trust
separately. Include the EIN (if any) for each trust. Describe If you owned (within the meaning of section 958(a) or (b)) at
the assets and liabilities (using the categories on the any time during the 2-year period ending on the date of your
balance sheet on page 2 of Form 8854) from your interest in expatriation, more than 50% of the vote or value of a foreign
each trust. corporation, income or gain you receive from the foreign
corporation during the tax year will be treated as from
Note. To determine if you are a beneficiary of a nongrantor sources within the United States, to the extent such income
trust, you must allocate the property interests of the trust or gain is not more than the earnings and profits from such
based on all relevant facts and circumstances. To determine stock that were earned or accumulated before the date of
the value of your beneficial interest, use the valuation your expatriation while such ownership requirements were
principles under section 2512. See Section III of Notice met.
97-19 for examples of how the property interests of a
nongrantor trust should be allocated to the beneficiaries of Line 6
the trust. You can find Notice 97-19 on page 40 of Internal
Revenue Bulletin 1997-10 at www.irs.gov/pub/irs-irbs/ If, during the current tax year, you exchanged any property,
irb97-10.pdf. and (a) the gain would not (but for this paragraph) be
recognized on such exchange in whole or in part, (b) income
Lines 11 and 12 derived from such property was from sources within the
United States (or, if no income was so derived, would have
Intangible property includes any of the following items that been from such sources), and (c) income derived from the
have substantial value independent of the services of any property acquired in the exchange would be from sources
individual. outside the United States, then the property will be treated
as sold for its fair market value on the date of the exchange,
• Patent, invention, formula, process, design, pattern, or in accordance with Section V of Notice 97-19, 1997-1 C.B.
394. The removal of appreciated property with an aggregate
know-how. fair market value in excess of $250,000 from the United
States is an exchange of property covered by this provision.
• Copyright, literary, musical, or artistic composition.
• Trademark, trade name, or brand name. Enter on line 6 the total amount of gain resulting from any
• Franchise, license, or contract. such exchanges during the tax year and, if you have elected
• Method, program, system, procedure, campaign, survey, to enter into a gain recognition agreement with the IRS
deferring the gain, attach a copy of the agreement to your
study, forecast, estimate, customer list, or technical data. Form 1040NR. If you dispose of any property covered by a
gain recognition agreement during the tax year, also list the
• Any similar item. gain realized on this line. See Section V of Notice 97-19 for
additional information on exchanges and gain recognition
Line 19 agreements.

Attach a statement describing and listing the total value of Line 7
any other assets you have that are not included on lines 1
through 18. If, during the 10-year period beginning on the date of your
expatriation, or during the 5-year period prior to your
Line 20 expatriation, you contributed U.S.-source property to a
foreign corporation that would be a controlled foreign
Combine lines 1 through 5 and 6 through 19, not including corporation had you remained a U.S. citizen or LTR, any
any amounts on line 5a. The amounts on line 5a are income or gain on that property received or accrued by the
included in determining the amounts on line 5. foreign corporation during the tax year is treated as received
or accrued by you. See Section VI of Notice 97-19 for
Line 23 additional information.

Attach a statement describing and listing the total value of Line 8
any other liabilities you have that are not included on lines
21 and 22. Add lines 1f through 7 to report your total income from U.S.
sources.
Schedule B–Income Statement

Schedule B is required to satisfy the requirements of section
6039G(b)(5) and must be completed without regard to
whether you have income subject to tax under section 877
for the tax year.

Note. If you are subject to section 877 for all or a portion of
the tax year, and you have income subject to tax under

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Line 9 right, a phantom stock arrangement, a cash-settled
restricted stock unit, an unfunded and unsecured promise to
List the total amount of all other income or gain for the tax pay money or other compensation in the future (other than
year. such a promise to transfer property in the future), and an
interest in a trust described in section 402(b)(1) or (4)
Penalties (commonly referred to as a secular trust).

If you are subject to section 877 and required to file Form Eligible deferred compensation item means any deferred
8854 for any tax year, and you fail to file or do not include all compensation item with respect to which: (i) the payer is
the information required by the form or the form includes either a U.S. person or a non-U.S. person who elects to be
incorrect information, you will owe a penalty of $10,000 for treated as a U.S. person for purposes of section 877A(d)(1)
that year, unless it is shown that such failure is due to and (ii) the covered expatriate notifies the payer of his or her
reasonable cause and not willful neglect. status as a covered expatriate and irrevocably waives any
right to claim any withholding reduction on such item under
Part B—For Persons Who any treaty with the United States. Separate guidance will be
issued providing a procedure for a payer who is a non-U.S.
Expatriated After June 16, 2008 person and wishes to be treated as a U.S. person for
purposes of section 877A(d)(1).
Note. You must also complete Part A, Schedules A and B.
Line 7b. Ineligible deferred compensation item means any
Section I—Expatriation Information deferred compensation item that is not an eligible deferred
compensation item.
This section must be completed by all individuals who
expatriate after June 16, 2008. Line 7c. A specified tax deferred account includes:

Line 2 1. An individual retirement plan (except those described
in section 408(k) or 408(p)),
You can use the balance sheet on page 2 to arrive at your
net worth. 2. A Coverdell education savings account,
3. A health savings account or an Archer medical
Line 5 savings account.

Check the “Yes” box if: Line 7d. A nongrantor trust is the portion of any trust,
whether domestic or foreign, of which you were not
• You expatriated before you were 181/2, and considered the owner on the day before your expatriation
• You have been a resident of the United States for not date. You are considered a beneficiary of such trust if:

more than 10 tax years before you expatriated. For the 1. You are entitled or permitted, under the terms of the
purpose of determining U.S. residency, use the substantial trust instrument or applicable local law, to receive a direct or
presence test described in chapter 1 of Publication 519. indirect distribution of trust income or corpus (including, for
example, a distribution in discharge of an obligation);
Line 6
2. You have the power to apply trust income or corpus
Check the “Yes” box if you have complied with your tax for your own benefit; or
obligations for the 5 tax years ending before the date on
which you expatriated, including but not limited to, your 3. You could be paid from the trust income or corpus if
obligations to file income tax, employment tax, gift tax, and the trust or the current interests in the trust were terminated.
information returns, if applicable, and your obligation to pay
all relevant tax liabilities, interest, and penalties. You will be Unless you elect to be treated as having received the
subject to tax under section 877A if you have not complied value of your interest in the trust, as determined for
with these obligations, regardless of whether your average purposes of section 877A, as of the day before your
annual income tax liability or net worth exceeds the expatriation date, you may not claim a reduction in
applicable threshold amounts. withholding on any distribution from the trust under any
treaty with the United States. Before you can make the
Line 7 election, you must obtain a letter ruling from the IRS as to
the value, if ascertainable, of your interest in the trust as of
Complete lines 7a-d only if you are a covered expatriate. the day before the expatriation date by following the
procedures set forth in Rev. Proc. 2009-4, 2009-1 I.R.B.
None of the amounts checked on line 7 are subject to the 118, available at www.irs.gov/irb/2009-01_IRB/ar09.html.
mark-to-market tax. Do not include them on line 8. You must make this election by checking the box under line
7d of this form and attaching a copy of the letter ruling both
Some of these amounts may be otherwise taxable or to this form and to your timely filed tax return (including
TIP subject to income tax withholding at source. You extensions for the 2008 tax year). Until you obtain the
valuation letter ruling and provide a copy of such letter ruling
must provide Form W-8CE to the payer of the to the trustee of the nongrantor trust together with
relevant items. See paragraphs (d), (e), and (f) of section certification, under penalties of perjury, that you have paid
877A for more information. all tax due as a result of your election, any taxable
distributions that you receive from the trust will be subject to
Line 7a. Generally, deferred compensation includes any 30% withholding. If you have an interest in more than one
amount of compensation if, under the terms of the plan, nongrantor trust, you must attach the language of line 7d for
contract, or other arrangement providing for such each nongrantor trust.
compensation (compensation arrangement), the following
conditions were met. Section II—Recognition of Gain or Loss on
the Deemed Sale of Mark-To-Market
1. You had a legally binding right on your expatriation Property
date to such compensation,
Complete Section II only if you are a covered expatriate. If
2. The compensation has not been actually or you need additional space for the description of property, or
constructively received on or before the expatriation date, if you need additional entry lines, attach a continuation
and statement.

3. The compensation is payable on or after the
expatriation date.

Deferred compensation generally includes an amount,
whether or not substantially vested, that constitutes
nonqualified deferred compensation for purposes of section
404(a)(5) (determined without regard to Regulations section
1.404(b)-1T, including a cash-settled stock appreciation

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Line 8, Column (a) market value of $500,000 and a basis of $800,000. X must
allocate the exclusion amount as follows:
An interest in property includes money or other property,
regardless of whether it produces any income or gain. In Step 1: Determine the built-in gain or loss of each asset
addition, an interest in the right to use property will be by subtracting the basis from the FMV of the asset on the
treated as an interest in such property. However, do not list day before the expatriation date.
the following.
Basis FMV Built in Gain/Loss
1. Deferred compensation items.
2. Specified deferred accounts. Asset A $200,000 $2,000,000 $1,800,000
3. Interests in nongrantor trusts. Asset B $800,000 $1,000,000 $200,000
Asset C $800,000
You are considered to own any interest in property that $500,000 ($300,000)
would be included in your gross estate for federal estate tax
purposes under Chapter 11 of Subtitle B of the Code if you Step 2: Allocate the exclusion amount to each of the gain
died on the day before the expatriation date as a citizen or properties by multiplying the exclusion amount ($600,000)
resident of the United States. Whether property would be by a ratio of the deemed gain attributable to each gain
included in your gross estate will be determined without property over the total gain of all the gain properties deemed
regard to sections 2010 through 2016. For this purpose, you sold.
are considered to own your beneficial interest(s) in each
trust (or portion of a trust), other than a nongrantor trust Asset A: $1,800,000 × $600,000 = $540,000
subject to section 877A(f), that would not be included in your $2,000,000
gross estate as described in the preceding sentences. Your
beneficial interest(s) in such a trust shall be determined Asset B: $200,000 × $600,000 = $60,000
under the special rules set forth in section III of Notice $2,000,000
97-19, 1997-1 C.B. 394.
Step 3: Figure the final amount of deemed gain on each
Line 8, Column (b) asset by subtracting the exclusion amount allocated to each
asset.
Use the fair market value (FMV) on the day before your
expatriation date. FMV is the price at which the property Asset A: $1,800,000 − $540,000 = $1,260,000
would change hands between a buyer and a seller when Asset B: $200,000 − $60,000 = $140,000
both have reasonable knowledge of all the necessary facts
and neither has to buy or sell. If parties with adverse Line 8, Column (f)
interests place a value on property in an arm’s-length
transaction, that is strong evidence of FMV. Complete this column in order to report on which schedule
or form you reported each gain or loss amount for each
Line 8, Column (c) property listed in column (a) (for example, Schedule D
(1040) or Form 4797).
Generally, the cost or other basis in this column cannot be
less than the fair market value of the property on the date Line 8, Column (g)
you first became a U.S. resident. However, you can make
an irrevocable election to determine basis without regard to Complete this column only for those properties for which you
this restriction. Print “(h)(2)” after any entry for which you are electing to defer tax. First, complete Section III to line
make this election. 14. On a separate attachment, allocate the amount of tax
eligible for deferral among all gain properties listed in line 8.
Line 8, Column (e) The tax attributable to a particular property is determined by
multiplying the amount on line 14 by the ratio of the gain for
Before you complete column (e), you must allocate the that property entered in line 8, column (e), over the total
exclusion amount to the gain properties on a separate amount of gain of all gain properties of line 8, column (e).
schedule. Attach a copy of the separate schedule to this On line 8, column (g), enter the tax attributable to each
form. To allocate the exclusion amount, determine the gain property for which you are electing to defer tax. Then enter
of each gain property listed in column (a) and enter that gain the total deferred tax for those properties from line 10,
in column (d). If the total gain of all the gain properties column (g), on line 15.
exceeds the exclusion amount ($600,000), then allocate the
entire exclusion amount to the gain properties by multiplying Example. Section II has four assets, each resulting in a
the exclusion amount by the ratio of the gain determined for deemed gain in column (d). The amount of tax eligible for
each gain property in column (d) over the total gain of all deferral in Section III, line 14, is $575,000. You must go
gain properties listed in column (d). After you have allocated back to Section II, line 8, column (g), to allocate the deferred
the exclusion amount to the gain properties, subtract the tax among the individual properties.
exclusion amount allocated to each gain property from the
gain reported for that property in column (d), and enter the You must attach a computation to show how you
resulting amount of gain in column (e). If the total gain of the
gain properties in column (d) is less than the exclusion ! figured the tax attributable to each property.
amount (but greater than -0-), then you must use the total
gain amount as the exclusion amount, and you must CAUTION
allocate the exclusion amount, as adjusted, to the gain
properties under the method described above. The See the instructions for Section III for more information
exclusion amount allocated to each gain property may not on deferring tax.
exceed the amount of that gain property’s built-in gain.
Reporting gain or loss. You must report and recognize
Example. X, a covered expatriate, renounced his the gain (or loss) of each property reported in line 8, column
citizenship on Date 2. On Date 1, the day before X’s (a), on the relevant form or schedule of your Form 1040 for
renunciation of his citizenship, X owned three assets, which the portion of the year that includes the day before your
he had owned for more than one year. Asset A is business expatriation date. The return to which you attach your form
property and assets B and C are personal property. As of or schedule will depend on your status at the end of the
Date 1, Asset A had a fair market value of $2,000,000 and a year. See Publication 519, chapter 1, to determine which
basis of $200,000, Asset B had a fair market value of form you should file. The gain from column (e) or loss from
$1,000,000 and a basis of $800,000, and Asset C had a fair column (d) attributable to each property is reported in the
same manner as if the property had actually been sold. For
example, gain recognized from the deemed sale of a rental
property that has been depreciated is reported on Form
4797 as if it had been sold. Gain recognized from the
deemed sale of personal property (such as stock or a

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personal residence) is reported on Schedule D as if it had You can pay any tax deferred, together with interest at
been sold. Capital gain retains its character as capital gain; any time. However, the time for payment of tax attributable
ordinary gain retains its character as ordinary income. to a particular deferral asset can be extended only until a)
the year the asset is ultimately disposed of, or b) the year of
Section III—Election To Defer Tax death.

Use lines 12-15 to figure the amount of tax you can defer. You must file Form 8854 annually for years up to and
Before completing lines 12-15, you must fill out two
hypothetical individual income tax returns. The first return ! including the year in which the full amount of
includes all income, including the section 877A(a) gain and
loss. The second return includes all income except the CAUTION deferred tax and interest is paid.
section 877A(a) gain and loss. Attach both returns to this
Form 8854. Waiver of treaty benefits. As a further condition to
making the election to defer payment of tax on a particular
Line 11 asset, you must waive any right under any U.S. tax treaty
that would preclude the assessment or collection of the tax.
If you are not electing to defer tax on the gain reported on
line 8, column (e), report on the appropriate schedule or Signature
form the gain amount attributable to each particular property
as listed in line 8, column (e), and report the loss amount Form 8854 is not considered valid unless you sign it. If you
attributable to each particular property as listed in line 8, have someone else prepare Form 8854, you are still
column (d). If you are electing to defer tax, go to line 12. responsible for its correctness.

Line 12 Paid preparers. Generally, anyone you pay to prepare
Form 8854 must sign it in the space provided. The preparer
Enter on line 12 the amount of tax on line 61 of the first must give you a copy for your records. Someone who
return. prepares Form 8854 but does not charge you a fee should
not sign it.
Line 13
Paperwork Reduction Act Notice. We ask for the
Enter on line 13 the amount of tax on line 61 of the second information on this form to carry out the Internal Revenue
return. laws of the United States. You are required to give us the
information. We need it to ensure that you are complying
Line 15 with these laws and to allow us to figure and collect the right
amount of tax.
This is the maximum amount of tax you can defer. If you are
deferring tax on all properties, enter the amount from line You are not required to provide the information requested
14. If you are electing deferral on only certain properties, go on a form that is subject to the Paperwork Reduction Act
to Section II, line 8, column (g), to show how much tax is unless the form displays a valid OMB control number. Books
allocated to each property. Attach a computation. or records relating to a form or its instructions must be
retained as long as their contents may become material in
Procedure for deferral of payment. In order to defer any the administration of any Internal Revenue law. Generally,
portion of the mark-to-market tax, you must provide tax returns and return information are confidential, as
adequate security. Adequate security can be either: required by section 6103.

1. A bond that is furnished to, and accepted by, the IRS, The average time and expenses required to complete
that is conditioned on the payment of tax (and interest and file this form will vary depending on individual
thereon), and that meets the requirements of section 6325; circumstances. For the estimated averages, see the
or instructions for your income tax return.

2. Another form of security (including letters of credit) If you have suggestions for making this form simpler, we
that would be acceptable to the IRS. would be happy to hear from you. See the instructions for
your income tax return.
You must contact the office below in order to make the
appropriate arrangements for providing security.

Internal Revenue Service
SBSE Advisory Office
7850 SW 6th Court
Mail Stop 5780
Plantation, FL 33324-3202
Telephone: (954) 423-7344

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